1. Innovation Management
28 March 2013
Rotterdam Business School

2. Weekly overview
Week Instruction method Content/subjects Assignment
1 Lecture Introduction +
Business model
Innovation
Choose a company and specialization topic
Prepare pitch if signed up
2 Pitch arena
Lecture
IPR Read Sustainable innovation article
Solve the riddle
3 Pitch arena
Lecture
Collaboration Use relationship metaphor
Build ‘golden formula’ of collaboration
4 Pitch arena
Lecture
Sustainability TBD
5 Pitch arena
Lecture
Social media TBD
6 Final pitches Company case study Advise on IM

3. It is the long history of
humankind (and animal kind,
too) those who learned to
collaborate and improvise
most effectively have
prevailed.
- Charles Darwin

4. ColllllaboRRRRaaaattttiiiioooonnnn ssssTraaaatttteeeeggggiiiiES

5. Learning Outcomes of Lecture
• be able to define and differentiate collaboration
• identify some advantages (and disadvantages) of collaborating
• discuss the most common forms of collaborative arrangements
used in technological innovation
• outline approaches to choosing and monitoring partners
• discuss a) key success factors and b) common reasons for
failure

6. The XenoMouse

7. • Abgenix spent 7 years and $40 million to produce a
genetically-engineered mouse that could produce antibodies
with human protein sequences.
• One antibody, ABX-EGF showed great promise for treating
human illnesses like cancer, arthritis and organ transplant
rejection.
• Abgenix had to decide upon the further process of testing,
developing, regulatory and commercializing.
The XenoMouse

8. • Abgenix had to decide whether to:
– License ABX-EGF to a pharmaceutical or biotechnological company
which would do all further testing, development of antibodies for
specific diseases, and commercialization (bear little risk and receive
license royalties).
– Use a 50/50 joint venture with a biotechnology company to complete
the testing and commercialization (bear moderate risk and split both
costs and profits).
Including upfront payments to compensate for earlier investments.
– Pursue the ABX-EGF project as a solo venture (bear all risks and keep
all profits)
The XenoMouse

9. • In 2001 as they were burning through their
cash rapidly and the stock market had soured,
they had to decide, taking into account:
–Their short term cash needs
–Their potential for long term growth
–The ability to commercialize rapidly as
competitors were developing the same type of
drugs
The XenoMouse

10. Discussion Questions:
1. What are the pros and cons of Abgenix
collaborating with a partner on ABX-EGF?
2. If Abgenix chooses collaboration, would it be better
off licensing ABX-EGF to the pharmaceutical
company, or forming a joint venture?
3. How does Abgenix’s decision about collaborating
for ABX-EGF impact its prospects for its other drug
development projects?
The XenoMouse

12. “The biggest winners in the 21st century
will be those businesses that assemble a
global ecosystem of partners,
emphasising flexible access to products,
talents, and expertise, not ownership.”
Prahalad and Krishnan (2008)

13. Overview
• Firms must often choose between performing innovation
activities alone or in collaboration.
• Collaboration has the potential to enable firms to achieve
more, at a faster rate, and at less cost and risk
(XenoMouse).
• However, collaboration also entails sharing control and
rewards, is time-consuming and may risk partner wrong-
doing.
• The advantages of going solo are compared with those of
collaborating, and then different forms of collaboration are
compared.

14. Philips & Douwe Egberts

15. Nespresso

16. Advantages of Collaborating
• Obtaining skills or resources more quickly
• Reducing asset commitment and increasing
flexibility
• Learning from partner
• Sharing costs and risks
• Building cooperation around a common
standard

17. Levels of ‘Collaboration’
limited
communication
More defined
roles
Clear roles
Some shared decision
making
Shared decision making
Frequent communication
One system
Trust
Concensus
Adapted from Frey, Lohmeier et al, 2006. In Bauwen, 2011.

18. 0
500
1000
1500
2000
2500
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
NewTechnologyorResearchAlliances
Year
Trends in Strategic Technology Alliances

19. Key Questions to Guide Decision
• Whether a firm chooses to engage in solo
development or collaboration will be
influenced by:
– Availability of capabilities (does firm have needed capabilities in
house? Does a potential partner exist?)
– Protecting proprietary technologies (how important is it to keep
exclusive control of the technology?)
– Controlling technology development and use (how important is it to
direct development processes and applications?)
– Building and renewing capabilities (is the project key to these
capabilities?)

20. Types of Collaborative Arrangements I
– Strategic Alliances: formal or informal agreements
between two or more organizations (or other entities) to
cooperate in some way.
– Joint Ventures: a particular type of strategic alliance that
entails significant equity investment and often
establishes a new separate legal entity.
– Licensing: a contractual arrangement that gives an
organization the rights to use another’s intellectual
property, typically in exchange for royalties.

21. Brand licensing

23. Brand licensing II
• Brand licensing is the process of creating and
managing contracts between the owner of a
brand and a company or individual who wants
to use the brand in association with a product,
for an agreed period of time, within an agreed
territory. Licensing is used by brand owners to
extend a trademark or character onto products
of a completely different nature.[4]

24. Types of Collaborative Arrangements II
–Outsourcing: when an organization procures
services or products from another rather than
producing them in-house.
–Collective Research Organizations: organizations
formed to facilitate collaboration among a group
of firms.

25. Outsourcing

26. Outsourcing II
• 47% market share of the domestic footwear industry
• manufacturing throughout the Asian region for over twenty-five
years, using only subcontractors
• Output produced in factories in China, Indonesia, and Vietnam, but
they also have factories in Italy, the Philippines, Taiwan, and South
Korea.
• Nike does employ teams of four expatriates per each of the big three
countries (China, Indonesia, Vietnam), that focus on both quality of
product and quality of working conditions, visiting the factories
weekly.
• They also developed their code of conduct in 1992 and have
implemented it across the globe,

27. Outsourcing III

28. Bowing to pressure from critics who have tried to turn its famous shoe
brand into a synonym for exploitation, Nike Inc. promised today to root
out underage workers and require overseas manufacturers of its wares to
meet strict United States health and safety standards.
Philip H. Knight, Nike's chairman and chief executive, also agreed to a
demand that the company has long resisted, pledging to allow outsiders
from labor and human rights groups to join the independent auditors
who inspect the factories in Asia, interviewing workers and assessing
working conditions.
By JOHN H. CUSHMAN Jr
Published: May 13, 1998
Nike Pledges to End Child Labor
And Apply U.S. Rules Abroad

29. ''We believe that these are practices which the conscientious, good
companies will follow in the 21st century,'' he said in a speech here at the
National Press Club. ''These moves do more than just set industry
standards. They reflect who we are as a company.''
Nike said it would raise the minimum age for hiring new workers at shoe
factories to 18 and the minimum for new workers at other plants to 16, in
countries where it is common for 14-year-olds to hold such jobs. It will
not require the dismissal of underage workers already in place.
By JOHN H. CUSHMAN Jr
Published: May 13, 1998
Nike Pledges to End Child Labor
And Apply U.S. Rules Abroad

31. Choosing and Monitoring Partners
• Partner Selection
–Resource fit
–Strategic fit
–Impact on Opportunities and Threats
–Impact on Internal Strengths and Weaknesses
–Impact on Strategic Direction

32. “Organizations do not
collaborate, people do!”
Maura Walsh (2013)

33. Honeymoon approach
Think of the last time you fell in love…
– How was the attaction established?
– What where key factors for the relationship
to work out?

35. In search of the ‘golden formula’

36. Trade offs: advantages
• Get instant market access, or at least speed your entry into a
new market.
• Increase sales.
• Gain new skills and technology.
• Develop new products at a profit.
• Share fixed costs and resources.
• Enlarge your distribution channels.
• Broaden your business and political contact base.
• Gain greater knowledge of international customs and culture.

37. Trade offs: disadvantages
• Weaker management involvement or less equity stake.
• Fear of market insulation due to local partner's presence.
• Less efficient communication.
• Poor resource allocation.
• Difficult to keep objectives on target over time.
• Loss of control over such important issues as product quality,
operating costs, employees, etc.

38. Choosing and Monitoring Partners
• Partner Monitoring and Governance
–Successful collaborations require clear yet flexible
monitoring and governance mechanisms
–May utilize legally binding contractual
arrangements
- Helps ensure partners are aware of rights and
obligations.
- Provides legal remedies for violations.

39. Choosing and Monitoring Partners
• Partner Monitoring and Governance
–Contracts often include:
1. What each partner is obligated to contribute.
2. How much control each partner has in arrangement.
3. When and how proceeds of collaboration will be distributed.
4. Review and reporting requirements.
5. Provisions for terminating relationship.

40. Key Failure Factors
• Lack of understanding of each other’s/joint goals
• Lack of understanding of each other’s roles and
responsibilities
• Insufficient governance mechanisms
• Ineffective/incompatible structures
• Poor communication
• Conflicting chemistry
• Divergent expectations and interests
• Breakdown in trust